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Monday, October 20, 2014

Despite govt assurances, LOWER prices of goods with GST unlikely - business leaders

Despite govt assurances, LOWER prices of goods with GST unlikely - business leaders
PETALING JAYA - The government has been emphasizing over and again that goods prices will not rise but fall following the implementation of GST with effect from next April.
However, with three most important things, namely petrol, electricity and tolls all on the rise, local businesses feel that it is almost impossible that goods prices will stay low.
Cashflow crunch
Malaysia Garments Wholesale Merchants Association chairman Datuk Ang Say Tee said although GST is applicable to garments, he felt that garment prices should drop instead of rising.
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He is nevertheless worried that businesses would encounter cashflow pressure following the introduction of GST.
"Business owners must pay the 6% GST to the Customs Department within three months but the Customs Department will only give tax rebates in two years' time. This will result in a cashflow crunch.
"For instance, for RM2 million worth of products, business owners will need to come up with 6% or RM120,000 first, which is by no means a small sum."
He told Sin Chew Daily since the government has replaced the 10% sales tax with the 6% GST, garment prices should fall instead of rising because business owners have saved 4% in tax payment.
However, the implementation of GST means additional manpower needed to handle the taxation matters, and this will increase the operating cost of businesses. It is anticipated that the entire market will be dampened following the introduction of GST next year as the purchasing power of Malaysians will be weakened. Businesses are not expected to transfer the additional cost to the consumers given the stiff competition.
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And said many companies were expected to shrink the sizes of their businesses to reduce cost.
He anticipated that the entire market would remain sluggish from now until next April as many businesses would try to clear their stocks by April 1 next year.
Dato' Ang Say Tee
He said business owners would come under double pressure as they not only need to worry about their businesses but also declare their tax returns punctually. He hoped the government would give a longer grace period of about one to two years while shortening the tax rebate duration.
Impossible to keep prices low
The Federation of Malaysian Electrical Appliances Dealers Association (Fomeda) president Wong Lean Fatt said installation and materials cost of electrical appliances were expected to increase by 6% following the introduction of GST next year.
When contacted by Sin Chew Daily, he said GST would certainly be imposed on electrical appliances, and that the dealers are currently negotiating with suppliers whether to absorb the additional cost themselves.
He said while the dealers could absorb the additional 6% GST themselves, the labor cost would still need to be borne by the consumers.
He said although the government had reiterated that goods prices would fall instead of rising after the GST is put into implementation, Wong felt that this was unlikely to happen.
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"Now the three most important things, namely petrol, electricity and tolls are getting more expensive, and it is impossible to ask merchants to keep their prices low."
He said many investors and merchants were still on the lookout and he believed their businesses would slow down mainly due to weakened purchasing power of consumers. -Mysinchew

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